State Tax on Indian Cigarettes Changes Today

While state officials continue talks over a gambling compact with the Seminole Indian Tribe of Florida, another, less public series of negotiations may soon begin on another activity; smoking.

On Wednesday, a blanket state tax exemption for cigarettes sold to Indian tribes was replaced by a more complex matrix of fees. The provision is part of a larger $1 surcharge on all cigarettes sold in the state, an effort by lawmakers expected to raise more than $900 million a year.

The new law still allows tribal members to purchase cigarettes at reservation retailers without paying the $1 tax. In theory, non-Indians purchasing cigarettes at reservation shops must pay the tax – an attempt to deal with concerns that raising the cigarette tax would simply drive smokers to buy their smokes from tribal retailers. Enforcement may be tricky.

Each tribe will be allotted coupons for tax-free cigarettes based on its size. The law allows each member to receive five packs per day, or 182 cartons of cigarettes over the course of a year. With 3,500 members, the Seminole Tribe, for example, would receive coupons for 6.4 million packs, or 1.27 billion cigarettes.

About 26 million packs of cigarettes are sold each year at stores on the Seminole and Miccosukee reservations, according to the Florida Department of Business and Professional Regulation, which is charged with regulating cigarette sales. Because tribes are sovereign nations, the state can't stop them from selling cigarettes or force them the tax.

The plan, therefore, targets wholesalers, who would collect coupons from tribal retailers in lieu of the tax. Wholesalers would turn in the coupons to state regulators along with information matching tribal sales. Wholesalers would not be reimbursed by the state for cigarettes sold in excess of the tribal allotment. That is, if the tribe sold more cigarettes than the government thinks it would sell just to its own members then the wholesaler is going to be on the hook for tax on cigarettes presumably sold to non-Indians.

“We’re not going to be looking at individual sales,” said Jenn Meale, DBPR spokeswoman. “We’ll be focusing on the allotments.”

The law allows the state to enter into agreements with the tribes over cigarette revenue, a provision that would supersede legislation that went into effect Wednesday.

“The Seminole Tribe has moved ahead to charge the sales tax,” said Gary Bitner, a spokesman for the tribe. “It's also studying its options for the future.”